Discrimination for two-way models with insurance applications

Article type: Research Article

Authors: Brown, G.O.^; | Buckley, W.S.

Affiliations: Statistical Laboratory, Centre for Mathematical Sciences, Cambridge, UK, and Bank of America Merrill Lynch. E-mail: [email protected] | The Institute of Mathematics, Actuarial and Computer Sciences, Kingston, Jamaica. E-mail: [email protected]

Note: [] Address for correspondence: G.O. Brown, Statistical Laboratory, Centre for Mathematical Sciences, Cambridge CB3 0WB, UK. E-mail: [email protected]

Abstract: We review and apply several approaches to model selection for analysis of variance models which are used in a credibility and insurance context. The reversible jump algorithm is employed for model selection, where posterior model probabilities are computed. We then apply this method to insurance data from workers' compensation insurance schemes. The reversible jump results are compared with the Deviance Information Criterion, and are shown to be consistent.

Keywords: Reversible jump MCMC, loss ratios, Bayesian analysis, model selection

DOI: 10.3233/RDA-130094

Journal: Risk and Decision Analysis, vol. 4, no. 4, pp. 267-290, 2013